Google's YouTube Lets Content Creators Charge Fees to Viewers
"I think it's a great thing because it creates a marketplace where one doesn't exist today," said Daniel Maycock, national leader, technology strategy, at Slalom Consulting. "The way most people make money on YouTube today is through advertising. There's no incentive to create better or new content that way" because such online advertising usually only generates a small amount of revenue for most content producers. The new YouTube pilot program, however, "incentivizes more people to create better content and to stay consistent with their content, while lowering the bar in which people can make money with their videos," said Maycock. "For content producers, they will finally get something out of their work." By trying a pilot subscription model, "I think that YouTube is going after a Hulu or Netflix" and their markets, he said. Consumers, though, are at least initially not going to be too thrilled with the idea of paying for content that they have received free on YouTube in the past, said Maycock. "I think consumers will initially resist it because they are used to the free stuff. But I think over time they will get used to it," especially due to the low initial subscription rates and the two-week trial periods offered by YouTube. "There are some people who are really addicted to some of the series' shown on YouTube, and they'll probably pay for that content."For video developers, the pilot program "gives them a new means of getting their content out to paying customers," said King. This move actually could eventually be beneficial for consumers, as well, he said. "If this works the way YouTube intends it to work, what consumers could finally have is access to something they've wanted for a long time on cable television—the ability to specify exactly what channels they want to subscribe to each month. Right now, they are locked into cable channel packages with very few exceptions and can't specify the channels they want. Cable companies have insisted for years that it's too technically complex to do that." Such an option could be game-changing to the world of cable TV, he said. "If the HBOs and premium sports channels on cable television decide to do this same subscription model with YouTube in the future, it could be the death knell of cable companies," said King. Rob Enderle, principal analyst of Enderle Group, said the move to a subscription option "was always in the cards for YouTube. They want to be the primary provider of content and to do that with video they need to have both professional and user work on the site. Ads don't generate enough by themselves to cover the professional work, as Hulu showcased, so there has to be an additional fee associated to cover the extra cost." Enderle said he expects that the YouTube pilot will result in what becomes "a mix of free and fee content, at least for a while. But I do think that eventually we'll end up paying a fee to get better access to both." Ultimately, YouTube had to make this move if they want to achieve their goal of capturing more users, said Enderle. The problem, though, could be Google's leadership, he said. "There is strategy and execution," said Enderle. "I think the strategy is sound but Google has shown an almost complete disregard for understanding consumers, and that disregard could hamper this effort significantly as it may critically damage their execution." In March, YouTube announced that it has grown to providing video content for more than 1 billion viewers per month. The popular video-sharing site has helped launch the careers of a slew of entertainers and made celebrities out of ordinary citizens, thanks to viral videos.
Charles King, principal analyst of Pund-IT, said the initial YouTube 99-cent-per-month pricing for the subscriptions is "sort of the online video equivalent of the price of an app. I think that can be very attractive for consumers who are looking for specific kinds of content."